Stephan Turk, 67, has been put under curfew at home with an electronic tag after the shooting last week that left a teenage robber dead outside his jewellery shop in Nice.
An accomplice escaped on a motorbike.
In a country where gun violence is rare but thefts are increasingly common, the shooting has placed the government in a difficult position.
“Even when faced with the unbearable, we have to let justice prevail,” interior minister Manuel Valls said in Nice, where he was sent by the president after a protest by hundreds of Mr Turk’s supporters.
France has seen a spate of high-profile jewellery thefts lately. A single gunman in the southern city of Cannes took an £85.5m (€101.8m) cache this summer. That was followed by another armed robbery days later in the same city.